India - Mini-hydro development on irrigation dams and canal drops pre-investment study (Vol. 1 of 3) : Main report

- --Xi. AAL~~~~~~-i*  JOINT UNDP/WORLD BANK ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME (ESMAP) PURpOSE The Joint UNDP/ World Bank Energy Sector Management Assistance Programme (ESMAP) was launched in 1983 to complement .ne Energy Assessment Programme which had been established three years earlier. An international Commission was convened in 1990 to address the creation of ESMAP's role in the Nineties. It concluded that the Programme had a crucial part to play over the next decade in assisting the developing countries to better manage their energy sectors given that the supply of energy at reasonable prices is a critical determinant of the pace and magnitude of the growth process. The Commission's recommendations received broad endorsement at the November 1990 ESMAP Annual Meeting. Today, ESMAP is carrying out energy assessments, preinvest.ment and prefeasibility activities and is providing institutional and policy advice. The program aims to strengthen the impact of bilateral and multilateral resources and private sector investment through providing technical assistance to the energy sector of developing countries. The findings and recommendations emerging from ESMAP activities provide govwrnments, donors, and potential investors with the information needed to identify economically and environmentally sound energy projects and to accelerate their preparation and implementation. ESMAP's operational activities are managed by two Divisions within the Industry and Energy Department at the Worla Bank and an ESMAP Secretariat. X The Programme's activities are governed by the ESMAP Consultative Group which consists of its co- sponsors, the UNDP and the World Bank, the governments which provide financial support and representatives of the recipients of its assistance. The Chairman of the Group is the World Bank's Vice President, Sector Policy and Research. He is assisted by a Secretariat headed by the Group's Executive Secretary who is also responsible for relations with the donors and securing funding for the Programme's activities. The Secretariat also gives support and advice to a Technical Advisory Group of independent energy experts which meets periodically to review and scrutinize the Programme's strategic agenda, its work program and other issues related to ESMAP's functioning. 'MThe ESMAP Strategy and Programs Division is responsible for advising on which countries shoald receive ESMAP assistance, preparing relevant ESMAP programs of technical assistance to these countries and supports the Secretariat on funding issues. It also carries out broadly based studies such as energy assessments. * the ESMAP Operations Division is responsible for the detailed design and implementation of tasks consisting mainly of sub-sectoral strategy formulation, preinvestment work, institutional studies, technical assistance and training within the framework of overall ESMAP country assistance programs. FUNDING The ESMAP represents a cooperative international effort supported by the World Bank, the United Nations Development Programme and other United Nations agencies, the European Community, Organization of American States (OAS), Latin American Energy Organization (OLADE), and a number of countries including Australia, Belgium, Canada, Denmark, Germany, Finland, France, Iceland, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Sweden, Switzerland, the United Kingdom and the United States. FURTHER INFORMATION For furither information or copies of completed ESMAP reports, contact: Office of the Director OR The Executive Secretary Industry and Energy Department ESMAP Consultative Group The World Bank The World Bank 1818 H Street N.W. 1818 H Street, N.W. Washington, D.C. 20433 Washington, D.C. 20433 U.S.A. U.S.A.  lj c L I) i II INDIA Mini-Hydro Development on Irrigation Dams and Canal Drops Pre-Investment Study Volume I: Main Report July 1991  Currency Equivalents Currency Unit - Rupees (Rs.) Rs. 1.00 = Paise 100 1 US Doliar = Rs. 17.90 Rate as of September 1990 Fiscal Year April 1 - March 31 Measures and Equivalents 1 cumec I 1 cubic meter per second 1 Kilowatt-hour (kWh) - 1,000 watt-hours 1 Gigawatt-hour = 1 million kilowatt-hours 1 kilovolt (kV) = 1000 volts 1 kilovolt-ampere (kVA) = 1000 volt-amperes 1 Meter (m) = 39.37 inches (in) 1 kilometer (km) - 1000 meters (0.6214 miles) ABBREVIATIONS AND ACRONYMS APSEB Andhra Pradesh State Electricity Board CEA Central Electricity Authority COSTBEN Cost Benefit Analysis Computer Program DNES Department of Non-Conventional Energy Sources EIRR Economic Internal Rates of Return GOT Government of India IRFDA Indian Renewable Energy Development Agency KSEB Kerala State Electricity Board KPCL Karnataka Power Company NTPC National Thermal Power Corporation NPV Net Present Value PCCOSTAB Cost Estimation Computer Program PFC Power Finance Corporation PSEB Punjab State Electricity Board RCC Reinforced Cement Concrete REC Rural Electrification Corporation SEB State Electricity Board SCF Standard Conversion Factor TNEB Tamil Nadu Electricity Board  TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY . ............................................... i I, INTRODUClloN ........................................................ I A. Background .................................................... 1 B. Objectives ...................................................... 4 C. Cornduct of Pre-Investment Study .................................... 5 D. Counterparts For Study ........................................... 6 E. Prospects Studied . ............................................... 6 II. CONCEPTUAL DESIGN AND STANDARDIZATION .......... ............. 10 A. Overview ..................................................... 10 B. Preliminary Analysis and Design ................................... 13 C. Standardization . ............................................... 19 m. DESIGN AND COSTING OF FACILITIES .............. ................. 24 A. Design of Civil Structures ........................................ 24 B. Design of Electrical Systems ...................................... 30 C. Grid-Tie Arrangements .......................................... 30 D. Capital Cost Estimates .......................................... 35 IV. ECONOMIC EVALUATION OF PROSPECTIVE SCHEMES ....... .......... 38 A. Introduction ... ............................... 38 B. Economic Value of Benefits and Costs ................................ 38 C. Discounted Cash Flow Analysis .................................... 39 V. FINANCIAL EVALUATION .................... ....................... 42 A. Introduction ................................................... 42 B. Cost Recovery Requirements for SEBs ............................... 42 C. Return On Equity For Private Sector ................................ 44 TABLES: 1. Economic Evaluation of Dam Based Mini-Hydro Schemes .................... viii 2. Economic Evaluation of Mini-Hydro Schemes at Canal Drops and Weirs .... ..... ix 3. Cashflow Balance for Mini-Hydro 'Cost Centers" ........................... ix 1.1 Irrigation Based Mini-Hydro Prospects in Selected States ..................... 1 1.2 Estimated Costs of Pilot Schemes in Southern Region ....................... 2 !.1 Overview of Turbine Performance Specifications .......................... 20 2.2 Standardised Specifications for Turbines ................................ 22 2.3 Standardised Design Specifications for Schemes ........................... 23 3.1 Unit Costs of Standardized Turbines and Generators ....................... 35 3.2 Capital Cost Estimates Schemes Associated with Dams/Barrages, and Weirs ..... 36 3.3 Capital Cost Estimates Associated with Canal Drops .37  Pare No. 4.1 Economic Evaluation of Dam Based Mini-Hydro Schemes ................... 40 4.2 Economic Evaluation of Mini-Hydro Sche-mes at Canal Drops and Weirs .... ... 41 5.1 Cashflow Balance for SEB Mini-Hydro "Cost Centers ....................... 44 5.2 Return on Equity for Private Investors ................................. 46 FIGURES: 2.1 Maddur Canal Drop Scheme (B/C Ratio) ............................... 15 2.2 MaddurFlow Duration Curve .............. .......................... 16 2.3 Maddur Energy Curve .......................... ................ 16 2.4 Sathanur Flow Duration Curve .......................... 18 2.5 Sathanur Head Duration Curve .......................... 18 2.6 Sathanur Energy Curve .......................... 18 2.7 Sathanur Dam Scheme (B/C Ratio) .......... ................ 18 BOXES: 1. List of Mini-Hydro Projects Studies .......................... iv 2.1 Multi-Unit Flow Control for Irrigation Based Mini-Hydro Schemes ..... ....... 14 2.2 Typical Preliminary Design Procedure for Canal Drop Schemes ..... .......... 15 2.3 Typical Preliminary Design Procedure for Dam Based Schemes ..... .......... 17 3.1 Minimizing Civil Works Cost of Dam Based Schemes ...................... 26 3.2 Realignment of Water Conveyance Structures ............................ 27 3.3 Eliminating By-Pass Channel for Canal Drop Schemes ...... ................ 28 3.4 Simplifying Construction of Multiple Drop Schemes ........................ 28 3.5 Use of Closed Conduits for By-Pass Channels ............................ 29 3.6 Alternative Grid-Tie Arrangements ............. ....................... 30 3.7 Comparative Analysis of Cost Estimates for Turbire ........................ 36 5.1 IREDA Mini-Hydro Loan Facility ............... ...................... 43 5.2 Terms of Lease Agreements in Karnataka ......... ...................... 45 ANNEXES: A. Derivation of Minimum Annual Energy Productivity for Schemes ..... ......... 47 B. Determination of Design Head for Dam Based Schemes ...... .............. 52 C. By-Pass Arrangements for Irrigation Based Mini-Hydro Schemes ..... ......... 59 D. Unit Costs of Equipment (1990 Prices) ...... ........................... 66 E. Sample Cost Estimates for Civil Works Component of Brindavan Scheme .... ... 71 F. List of Local Manufacturers of Mini-Hydro Plant in India ................... 78 G. Technical Drawings for Cast Study Schemes ............................. 82  Page No. FLOWCEIARTS/DIAGRAMS: Flowchart I: Preliminary Design of Prospective Mini-Hydro ..................... 11 Flowchart II: Screening and Optimizing Alternative Designs of Mini-Hydro ..... ...... 12 Flowchart III: Standardization of Designs for Prospective Mini-Hydro ..... ........... 21 Flowchart IV: Finalizing Desigu Specificatinns and Capital Cost Estimates ..... ....... 25 Diagram 1: Single Line Diagram (Capacity 350 kW - 1000 kW) .31 Diagram 2: Single Line Diagram (Capacity 1000 kW - 2000 kW) .32 Diagram 3: Single Line Diagram (Capacity 2500 kW - 5000 kW) .33 Diagram 4: Protection Scheme for Standardised Units .34 IBRD MAPS: 22781R Prospective Sites in 'iamil Nadu 22782 Prospective Sites in Kerala 22783 Prospective Sites in Andi;ra Pradesh 22784 Prospective Sites in Karnataka 22785 Prospective Sites in Punjab  EXECUTIVE SUMMARY A. Purpose 1. The purpose of this pre-investment study was to review the design and economics of a series of irrigation based mini-hydro schemes in the States of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu in the southern region, and Punjab in the northern region. The study was conducted by the Joint UNDP/World Bank Energy Sector Management Assistance Program (ESMAP), working in collaboration with th- Department of Non-Conventional Energy Sources (DNES), the State Electricity Loards (SEBs) in Andhra Pradesh, Kerala, Punjab, and Tamil Nadu, and the Karnataka Power Corporation Limited (KPCL). The report presents the results of the study in terms of the techno-economic concepts that were applied to improve the designs, minimize investment requirements, and thereby enhance the economic merits of the schemes. The report concludes with a economic and financial evaluation of prospective schemes in each of the five states. B. Structure of Report 2. The mair text of the report (Volume I) is structured as follows: Chapter I: Introduces the pre-investment study, reviews the objectives and scope of the study, and presents a brief overview of the irrigation based mini-hydro prospects in the States of Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, and Punjab. Chapter II: Reviews the methodology used for the conceptual design of the mini-hydro schemes and for standardization of equipment specifications. Chapter III: Elaborates on the main considerations used to streamline the layout of civil works and the electrical switching and protection systems. The chapter ends with a summary of capital cost estimates for each scheme. (hapter IV: Evaluates the economic viability of each of the mini-hydro schemes. The results are presented in terms of the economic internal rates of return, and the net present values at a 12% discount rate. Chapter V: Evaluates the financial impact of the schemes on each state, assuming that mini-hydro "cost centers" would be established by SEBs and the goal would be to achieve economic cost recovery. Also, the rate of return on equity is evaluated for private companies that may be interested in acquiring leases to develop captive power operations based on some of the mini-hydro prospects. Annexes: Contains additional data, information, and analysis for specific points that are highlighted in the main text. Technical Supplement: Volume II contains a complete se. of design data, graphs, technical drawings, photographs of sites, and Volume III presents the breakdown of cost estimates for each scheme within the five states.  - ii I C. Background Overview 3. on India, there is the general perception that mini-hydro schemes are economically unattractive investments which must be assigned a lower priority relative to the large conventional hydropower systems. Over the past decade, the pace of India's large conventional hydropower program has slowed down because of: (i) the lack of financial resources in the states with the greatest hydropower potential; (ii) the recurring and drawn out disputes over water rights between states; and (iii) environmental and resettlement issues associated with large schemes; and (iv) the limited technical resources to proceed simultaneously with the preparation of several large schemes. Recognizing that the above impediments do not usually arise with mini-hydro schemes, the GOI is re-evaluating the scope for increasing the contribution of mini-hydro schemes to the power development goals of the Eighth Plan. 4. In a recently completed review of the country's non-conventional energy program, ESMAP concluded that all the basic prerequisites for economically viable mini-hydropower generation exist at sites in India that are associated with irrigation water storage and distribution mnfrastructure (i.e., to harness the hydraulic energy created by discharges from irrigation dams and the flow of water across diversion weirs and canal drops). Compared to river based schemes, the cost of developing irrigation based mini-hydro schemes should be considerably lower because most of the civil works have already been constructed. 5. The ESMAP assessment emphasized that the potential for power generation with this category of mini-hydro application was significantly large in the country because of the extensive infrastructure for surface irrigation; since independence in 1947, the total area under irrigation in the couIntry has increased from 19.5 million hectares to over 70 million hectares. In the mid-1980s, the Rural Electrification Corporation (REC) conducted a survey to obtain data and informatian on the potential for power generation on existing irrigation systems in the country. The information supplied by the State Electricity Boards (SEBs) indicated that over a thousand sites associated with existing irrigation dams, diversion weirs, and canal drops were among the most prospective sites for mini-hydropower development. The REC survey highlighted the concentration of prospects in the southern region, especially in the States of Andhra Pradesh, Karnataka, and Tamil Nadu where over 500 sites with the potential to produce 2000 GWh annually had been identified. 5. Despite the initial assessment by ESMAP, there still are doubts within the GOI about the economic viability of irrigation based mini-hydro schemes. These doubts persist because the average costs of developing pilot schemes in several states had exceeded Rs. 30,000 per kW installed in 1988 prices. Following the transfer of responsibility of mini-hydro schemes (up to 3 MW capacity) from the Department of Power (DOP) to the DNES, a multi-agency Sub-Committee on Mini-Hydropower was convened to formulate a strategy to improve the cost-effectiveness of mini-hydro programs in generaL and to review proposals for the Eight Five-Year Plan (1990-95). In parallel with the work of the Sub-Committee, the GOI through DNES requested ESMAP to assist further in critically evaluating proposals for new irrigation based mini-hydro schemes in several states, and if warranted by the findings, to address comprehensively the pre-invest.ment requirements for a multi-scheme investment program for consideration by international and/or domestic financial institutions.  - iii v Improving Cost-Effectiveness 6. In response to the GOI request, ESMAP conducted a preliminary but critical examination of the available information and documentation on existing and proposed schemes. As a result, ESMAP identified three main shortcomings in the approach to irrigation based mini- hydro development in the country. First, the initial batch of schemes were conceived, designed, and executed as scaled down versions of large conventional hydro installations. Consequently, there are numerous redundancies in the designs for key features such as the layout of civil works, the facilities incorporated into the powerhouse structures, the selection of turbine-generator equipment, and the specification of electrical switching and protection systems. Second, due to the use of relatively complex layouts for the schemes, the gestation time to construct and commission the schemes has been unacceptably high. For example, it has taken over four years to complete the majority of the pilot schemes in the southern region. As a result of the slow pace of implementing the construction work, there has been a significant escalation in capital costs and in interest pavments during construction. Third; the viability of the pilot schemes were being undermined by the use of unnecessarily large numbers of technical staff to operate and maintain the mini- hydro schemes. The GOI concurred with the preliminary findings of ESMAP; consequently ESMAP proceeded with the study. D. Objectives 7. The principal objective of this study I/ was to apply techno-economic criteria to improve the design and economic viability of irrigation based mini-hydro schemes, and to identify and prepare a medium term investment program to develop a series of irrigation based mini- nydro schemes in the southern region of India. Accordingly, the study covered previously identified and investigated sites in the States of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu which have similar topography and irrigation regimes. At the request of the DNES, the scope of ,Ae study was expanded to include twelve prospective sites in the State of Punjab, all of which are earmarked for development under the mini-hydro component of the ongoing World Bank/IDA financed Punjab Irrigation and Drainage Project. .1/ This activity was executed by an ESMAP team which comprised: Messrs. Am;rquaye Armar (Senior Energy Planner, World Bank) the Team Leader; Alfonso Posada (Power Systems Consultant) the Principal Adviser; and Arcot. S. Che!varaj (Hydropower Consultant), V. Sreenivasa Murthy (Electrical Engineering Consultant), and Robert A. Smith (Financial Analyst - Consultant). Messrs. Y. K. Murthy and A. N. Singh (Management Consultants), former Chief Executives of the Central Water Commission and the Central Electricity Authority, contributed to the review of institution building aspects of irrigation based mini- hydro development; Mr. Sivaguru Chelvaraj (Researcher) assisted the team by developing and applying specialized computer software to process the hydrological data into design curves (i.e., flow duration, head duration, and energy production curves) for each scheme; and Mr. Okorie Uchendu (Researcher) assisted on the application of the World Bank's PCCOSTAB and COSTBEN computer programs for the cost estimation and economic evaluation of schemes. The report was prepared by Messrs. A. Armar and A. Chelvaraj; the technical drawings were prepared by Mr. A. Chelvaraj and Ms. Yeshi Gonfa provided secretarial support. The report was reviewed and cleared by the GOI in June, 1991. The Government of Switzerland provided ESMAP with the funding for this activity.  - iv - 8. The pre-investment studcy was structured to: (i) assess the technical and economic feasibility of developing between 10 to 20 prospects in each state, especially those that had already been investigated to at least the pre-feasibility stage by the respective SEBs; ,ii) critically evaluate the cost-effectiveness of engineering designs and specifications that had been proposed by the SEBs, and to redesign each scheme to maximize the number of kilowatt hours producel annually per unit of investment; (iii) update and revise the estimates of the capital costs of developing the schemes, and to evaluate the economic and financial viability of establishing the schemes to provide energy and voltage support to the power grid in the respective states; (iv) explore the scope for achieving full cost recovery on all phases of mini-hydro development; (v) evaluate the financial returns that private companies and investors wouid realize by developing the schemes as alternative sources of captive generation; and (vi) prepare a comprehensive report which would define technical concepts and design methodology used for the study, the relative benefits and costs of the proposed program, investment requirements at the state level, and the financial impact of the proposed program on the states. Despite the focus on the southern region, the design methodology was also meant to be applicable in future to the preparation of similar investment programs in the other regions and states of the country. E. Prospects Studied 9. Irrigation based mini-hydro schemes in India are the exclusive focus of LIST OF MINI-HYDRO PROSPECTS STDIED this study. In line with the DNES mandate, 2A BASED SCEMES CANAL DROP SCHEMES the original aim was to limit the scope of ANWI'RA PRADESH ANDHRA PRADESH the study to irrigation based mini-hydro Lower Manair Reservoir Guntur BC CIustor(4) prospects which, on the basis of previous Adanki IC Ctluster(2) pre-feasibility studies, would provide up to Lock Cn Suls 3 MW of instaled capacity. However, on Attehsaa Sriraaasgar Cluster (5) consultation with the SEBs about the Brindavan approach to be used for the Study, there Devrebeterkere KARNATAKA was a consensus that it would be more Harangi Anveri KabinI Kilaev appropriate to relax the ceiling on capacity, Haddur and to review all irrigation based mini- Nudhot Ralankottur hydro prospects for which a pre-feasibility NuQu Shahpur BC Ctuster(6) report had already been prepared. KERALA PUIJAB Accordingly, ESMAP collaborated with the angalam Abobar BC Cluster (4) DNES and the SEBs to critically examine Manlyar Shatinda BC Cluster(2) the original proposals and as necessary, to Peechi Bhakra MC Cluster(2) revise layouts and designs for schemes in Kuttiyadi Kotta BC Cluster (4) order to enhance economic attractiveness. TA IL NADU TAMIL NADU In al over fifty mini-hydro prospects in the Atiyar Grand Anicut southern region were reviewed, comprising Amravathy Tonkoral .M.P. . . . . Lower Shavani Tughlapatti eighteen sites which are associated with Peechiparsl VIIlampattf irrigation dams, three sites which are Perunchani Nettur USC located at either diversion weirs or Sethanue barrages, and over thirty sites on ten Thirumurthy branch canal twenty-two of which could Krfshng-rf be developed as five cluster schemes. In Box 1 addition, the study focused on twelve prospects in Punjab State which are located on the Sirhind and Bhakra Main Line Canals; all those  prospects are earmarked for development under the ongoing Puinjab Irrigation and Drainage Project. Altogether, ten of the prospects would have an installed capacity greater than 3 MW; only five of those schemes (i.e, the Brindavan Dam scheme in Karnataka, the Maniyar Barrage scheme in Kerala, the Lower Bhavani (RBC) scheme in Tamil Nadu, and the canal drop schemes at Thablan and Chanarthal respectively in Punjab) would require mandatory technical clearance from the CEA because the estimated capital costs are equal to exceed Rs. SO million. F. Design Approach 10. All the prospective mini-hydro schemes would be linked to the grid at 11/33 kV sub- stations. To be economicaly viable, each scheme must be able to produce energy at or below the marginal energy costs of generation in the grid. Furthermore, sinoe irrigation operations must not be disrupted by the introduction of the mini-hydro schemes, the primary objective of design was to harness the optimal amount of energy from the existing pattern of irrigation discharges. Accordingly, the approach used in the study was to establish techno-economic criteria that would reflect the above requirements and operating constraints, and to use the criteria as the yardstick for evaluating and improving the original designs for each of the prospects. Economic Value of Energy Produced 11 The economic viability of the irrigation based mini-hydro schemes was assessed in terms of their cost competitiveness relative to conventional sources of generation in the grid (i.e., from the least cost system development plan). Since India's power systems are planned and operated on a regional basis, the cost of generation from the proposed irrigation based mini-hydro schemes in the States of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu were compared to tne marginal costs of generation in the Southern Regional Grid, while those in Punjab were assessed in the context of the Northern Regional Grid. 12. Given the large sizes of the southern and northern regional grid systems, it is clear that none of the irrigation based mini-hydro schemes would be large enough to significantly affect the system development plans of the grids so as to require deferral of capacity expansion projects and/or a re-optimization of the use of existing thermal stations. Rather, the priui.ipal role of the irrigation based mini-hydro schemes would be to alleviate localized energy deficits by providing energy support to improve the quality of service in remote portions of the grid, thereby displacing higher cost energy supplies from thermal power s :tions and reducing the extent of standby diesel auto-generation by industrial and commercial establishments. 13. Accordingly, the economic value of the benefits of the mini-hydro schemes were derived in terms of the avoided costs of energy supply at the 33 kV level from the regional power grids. The high degree of congruity between the seasonal discharge of irrigat.on water and the seasonal variations in peak load within both regional grids, suggests that a capacity credit should be considered as an additional benefit of the proposed irrigation based mini-hydro schemes. However, given that the irrigation discharges are restricted to between nine to ten months each year, and that the SEBs do not have effective control of water flows even during those months of sustained operations, energy generation levels and capacity availability were considered to be "non- firm". Accordingly, capacity credits attributed to the proposed schemes were not quantified for the purposes of this evaluation which lends a conservative bias .o the economic value of the benefits. 14. During off-peak hours of service, the avoided costs of energy supply from the grid consists of the fuel costs plus variable operating and maintenLnce expenses of the less efficient or  - vi - marginal stations in service (i.e, the short-run marginal costs of generation); the average of the avoided costs of energy supply from the grids was determined to be Rs. 0.55-0.60 per kWh, which after adjusting upwards to account for 15% T&D losses resulted in the estimate of Rs. 0.63-0.69 per kWh for the economic value of energy produced during off-peak periods by the irrigation based mini-hydro schemes. By contrast, during the periods of daily peak demand (about 5 h.)urs), power outages are widespread and large numbers of industrial and commercial consumers resort to the use of standby diesel generators. Under those circumstances, the avoided costs of energy supply were estimated to be equivalent to the variable costs of auto-generation from stand-by diesel units that are operated by commercial (Rs. 1.31 per kWH) and Industrial (Rs. 1.16 per kWh) establishments. Combining the avoided costs of energy during the off-peak and peak periods, the composite value of the energy produced by the proposed irrigation based mini-hydro schemes was estimated to be of the order of Rs. 0.80 per kWh. Techno-Economic Design Criteria 15. In designing economically viable irrigation based mini-hydro schemes, the primary objective is to maximize the number of kilowatt hours produced annually per unit of investment; this techno-economic criteria is referred to as the annual energy productivity of a given scheme. The robustness of the sizing procedure (i.e., maximizing annual energy productivity) was checked against the more elaborate analysis which calculated the B/C ratios for the incremental generation by each additional unit for prospective dam based schemes. The analysis confirmed that the energy productivity concept provides reliable and consistent techno-economic criteria for selecting the optimal the plant size. 16. During preliminary design, an iterative procedure was used to select and evaluate different configurations of multi-unit turbine-generators. Each configuration was screened to ensure that energy would be produced for Rs. 0.80/kWh or less; for design purposes, this required that each scheme would have to produce a minimum of 20.6 kWh annually per 100 Rs. invested to be competitive economically with power supply from the grid. Standardization of Designs 17. To improve upon the original designs, considerable attention was given to identifying practical measures to minimize capital costs. For turbine-generator units, this was achieved by developing a set of standardized specifications according to available heads and discharges. As a result, a set of eight standardized specifications based on runner diameters were developed for the turbine requirements of all fifty-three schemes, ranging in diameter from 2800 mm. to 1000 mm (iLe., for fixed blade tubular turbines). Similarly, a set of eight standardized capacities were specified for the induction (asynchronous) generators; the minimum capacity was 350 kW and the maximum was 3500 kW. All redundant equipment and instruments that had previously been incorporated into the electrical protection and switching arrangements were eliminated. Standardized single line diagrams and electrical protection schemes were developed to cater to the requirements of all the fifty-three schemes. To minimize the costs of civil works, alternative layouts and designs of the main civil structures were re-defined and evaluated according to three criteria: (i) structural modifications to the existing irrigation facilities were reduced to a minimurn; (ii) layouts of civil structures and electrical switching systems were streamlined to facilitate construction, so that schemes would be implemented within two irrigation seasons; and (iii) layouts were specified so as not to cause any permanent loss of productive agricultural land. To the extent possible for each category of mini- hydro scheme, a set of standard designs was developed for main civil structures, particularly the powerhouse structures, and the water intake and conveyance structures.  - vii- Environmental Impacts 18. Prior to developing the schemes, each of the SEBs will need to obtain the necessary clearances from agencies that are responsible for forestry and environmental protection at the central and state GOI levels. Accordingly the revised designs were reviewed to ensure that none of the schemes would h,ave a negative impact on the environment or lead to the resettlement of nearby communities. Since the majority of the schemes are located in agricultural areas, special attention was given to specifying layouts for civil structures in a manner that would obviate the need to permanently destroy any productive agricultural land. For example, in canal drop schemes that utilize by-passes, the revised designs incorporate closed conduits for this reason. Similarly for the dam based schemes, the revised designs represent a marked improvement o'vr the original ones because major new civil works to create water intake and conveyance structures such as tunnels have been eliminated. Furthermore, none of the schemes will lead to the resettlement of communities or the displacement of existing farms. In each case, special care was taken to ensure that the water conveyance structures as well as the grid-tie arrangements would make maximum use of existing rights-of way for the states. Cost Estimation Procedure 19. Using information on 1990 proforma (budgetary) price quotations for equipment and materials that were made available by the SEBs as well as by international and local manufacturers and suppliers, the base costs of the main components of each scheme were computed. Total capital costs were estimated by increasing the base costs to incorporate: (i) the installation costs of the main items of equipment; (ii) physical contingencies; (iii) price contingencies to reflect inflation; and (iv) taxes and duties. Because of the detail provided in the standardized specifications for equipment and instrumentation, and the use of a minimum of civil works to establish the schemes, physical contingencies were calculated to be 5% of base costs. Price contingencies were derived assuming that the annual inflation rate (local costs) would vary from 8.4% in 1991, 7.0% during 1992-93, and decline to 6.6% by 1994. It also was assumed that taxes on the main cost items would be levied at 3% for civil works, 6% for electro-mechanical equipment, and 3% for electrical systems. More detailed and site specific development plans, including implementation schedules which dovetail with the irrigation system operating plans, would need to be prepared before more elaborate disbursement profiles for each state can be prepared. 2/ G. Evaluation of Schemes Economic Evaluation of Schemes 20. For economic analysis, a distinction was made between costs expressed in economic terms and those expressed in financial terms. In line with World Bank practice for economic analysis on India, the domestic component of the capital costs for equipment and civil works were 2/ The estimates of the base costs of the main components of each scheme, especially the electro-mechanical equipment, and the assumptions about the annual rate of inflation and price contingencies need to be revised due to the GOI decision in July, 1991 to adjust the exchange rate for the Rupee to a level of about Rs. 25 per US Dollar. During the period of the ESMAP study, the exchange rate was in the range between Rs. 17.5-18.5 per US Dollar.  - viii- adjusted by applying a standard conversion factor of 0.8, and removing taxes and duties. Annual operating and maintenance costs were taken to be equivalent to 2% of capital costs over the 25 year economic life of each scheme. The economic value of the energy benefits would be Rs. 0.80/kWh; it is expected that during detailed design of the proposed India Renewable Energy Development Project, a more comprehensive assessment of the benefits would be made to incorporate capacity credits at a justified level. Cost Recovery Requirements For SEBs. 21. One of the goals for the follow-up to this study is to demonstrate that, despite the persisting financial problems of the SEBs, the schemes in each state could be executed and managed by SEBs in a manner that would ensure economic cost recovery. During the study, discussions were held with senior officials at the state level to define a suitable framework for involving the SEBs in the implementation the mini-hydro schemes. The discussions centered primarily on the need to streamline project management arrangements in each state, and to introduce an effective system for monitoring and controlling the cost-effectiveness of mini-hydro schemes; the overall aim, despite the persisting financial problems of the SEBs, was to ensure that the mini-hydro nrograms in each state would be managed by SEBs in a manner that would ensure economic cost recovery. The consensus reached was that it would be feasible to set up mini-hydro "cost centers" in the respective SEBs to record, control, and monitor all costs associated with the mini-hydro program, and to track progress in constructing and operating the schemes to achieve economic cost recovery and self- sufficiency. Accordingly, one objective for the financial analyses was to determine the "profitability" of the proposed SEB mini-hydro "cost centers". EcOo6IIC EVALUAMTIO OF DOM BASED NRII-NVUo SCUMIES SCHEME NAME INVESTMENT ENERGY PROD. EIRR NPV ll (Rs./kW) (kMh pa/100 Rs.) (t) (Rs.mittlion) KARNATAKA Brindavan 5592 117.5 65.7 428.7 NHranDi 5942 51.8 30.8 103.0 Kobini 10972 29.8 17.5 57.8 Nugu 8827 32.2 19.1 50.0 Deverebelerkere 5204 58.9 42.1 61.0 Mudhol 8915 58.3 34.5 33.2 Naleprabha 8228 44.2 26.3 50.4 TANIL NADU Lower shavani 5891 58.3 34.6 172.6 Thirumurthy 9602 45.9 30.4 64.4 Amaravathy 8482 46.1 27.4 75.3 Atliyar 11642 61.6 38.5 57.7 Sathanur 5362 75.7 44.0 136.9 Peechiparaf 11724 33.2 19.7 43.9 Perunchanf 12962 26.5 21.3 39.0 ANDRA PRADESH Lower Mansir 9297 71.3 41.4 136.5 KERALA Peechi 7836 73.2 41.2 210.0 Nangalam 14140 20.4 13.5 10.6 Kuttfyadi 9130 55.7 40.7 199.5 Nanlyar 5426 71.4 41.1 394.9 SOURCE: ESHAP estimates Table 1  ix- ECOIIC EVALUATION OF NINt-HYDRO SCHE1ES AT CANAL DROPS ASD IEIRS SCHEME NAME INVESTMEU T ENERGY PROD. U M 12 (Rs.IW) t(kWh pe/100 Rs.) (X) (Rs.miltion) ANDHRA PRADESH Guntur SC Ctuster 12395 44.3 22.9 429.8 Adanki BC Cluster 12891 21.3 14.2 119.4 Lock-In-Suts 9807 56.0 29.2. 97.0 PUNJAB Bhatinda tC Cluster 14702 38.S 20.4 91.5 KOtla DC Ctuster 19478 27.9 14.7 222.1 Abohar BC Cluster 17396 29.6 18.6 305.2 .Bhakra Cluster 14406 51.0 19.7 368.5 K&RUATAKA Shahpur BC Cluster 16981 21.6 13.3 206.8 Attehata Weir 22560 28.6 12.2 22.7 Maddur (MIC 1) 10089 44.4 29.1 67.8 Kilars (NBC 2) 16199 26.5 13.9 55.2 Anveri 10245 42.8 29.3 44.0 Rajankoltur 9848 30.3 20.3 49.8 SWRCE: ESMAP estimates Table 2 22. The minimum cashflow requirements of the SEB mini-hydro 'cost centers" were computed based on full recovery of costs incurred due to debt servicing plus the annual operation and maintenance of schemes (i.e., estimated to be 2% of capital cost per annum). Since the goal is to achieve economic cost recovery, it was assumed that revenues would accrue to the mini-hydro "cost centeWs" from the "sale" of energy to the grid; as such the financial value of the revenue generated by the mini-hydro "cost center" was established in terms of: (i) the tariff paid 'Tor bulk power imports into each state (i.e., from the National Thermal Power Corporation); and (ii) the average tariff for power sales from the grid in each state. CASULCW BALANC FOR NINI1-NYDR "COS aISERS TOTAL ENERGY WEIJHTED AVERAGE NET REVENUES FOR STATE CAPACITY OUTPUT AV. COST TARtFf COST CENTERSO (MW) (GWh/yr.) (RB./kWh) (Rs./kWh) (Rs. millions p.a) Andhra Pradesh 19.5 95.3 0.49 0.62 10.5-12.4 Kerala 26.6 120.0 0.29 0.53 .28.8-37.4 Karnataka 37.7 170.0 0.44 0.73 27.3-49.4 Tamil Nadu 24.8 81.5 0.39 0.87 17.1-39.1 Punjab 22.2 133.0 0.51 0.67 12.0-21.4 So-arce:ESAP estimates; SEEs and KPC. Table 3  24. Based on the minimum cashflow calculations, it was determined that the weighted average costs of generation for the "cost centers" in the southern states would vary from Rs.0.29/kWh in Kerala to 0.49/kWh in Andhra Pradesh (Table 3). Similarly in Punjab State, the weighted average cost of generation for the mini-hydro "cost center' was estimated to be Rs. 0.51/kWh. At present, the tariff for NTPC bulk power supply into the state grids in the southern region is Rs. 0.60/kWh. With the exception of Kerala, which is entirely dependent on hydropower, the average tariff for sales in the southern region is higher than the rate paid for NTPC supply. The average tariff for sales is Rs. 0.53/kWh for Kerala, and varies from Rs. 0.62-0.87/kWh in the other three states; for Punjab, the average tariff is Rs.0.67/kWh. Hence the net revenues in excess of minimum cashflow requirements would be positive for the mini-hydro "cost centers" in each state, indicating that the mini-hydro "cost centers" would be self-supporting (Table 3). Retum on Equity for Private Sector Schemes 25. Because the SEBs have limited resources available to accelerate the development of irrigation based mini-hydro schemes, the State governments have taken steps to encourage private sector participation in the development of the prospects; new guidelines and regulations have recently been issued to foster private sector participation in mini-hydro development as an alternative source of captive generation; in response, several private companies have expressed an interest in developing the schemes to improve the reliability of power supply to their associated industrial plants. The Karnataka State Government, for example, has approved leases for private development of several prospective mini-hydro sites including the canal drop scheme at Maddur, and the dam based scheme at Mudhol, both of which are covered in this report. Accordingly, a sample evaluation was made to determine the financial rate of return on equity that would be realized by the prospective private investors, based on the conditions stipulated in lease agreements in Kamataka. It has been assumed that the private companies would obtain up to 50% of the investment required in the forlrL of loans from the Indian Renewable Energy Development Agency (IREDA) which currently would be available at an interest rate of 12.5% p.a with 10 years maturity. 26. With the conditions of the lease agreements in Karnataka, and assuming that designs presented in this study are adopted, the cost of generation at the Maddur canal drop would be Rs.0.73/kWh and at MudhoL Rs.0.61/kWh. The installed capacity of the irrigation based mini- hydro schemes will not be available at all times during the year; accordingly, the financial savings were confined to the variable costs of industrial diesel auto-generation (Rs. 1. 16/kWh). Taking into account the annual generation of each scheme, the deductions that would be allowed for depreciation (i.e., assuming 20 year straight line depreciation), wheeling charges to be levied by the Karnataka Electricity Board (KEB), but not the payments to be made to the State in lieu of electricity duties and the levies for maintenance of the irrigation reservoirs, the return on equity contributed by the private companies to develop each scheme would be 45% for the Maddur scheme, and 75% for the Mudhol scheme. Prima facie it would seem that development of the two schemes would be an attractive investment for private companies which need to secure a non- diesel source of captive power; private companies, especially those that plan to acquire diesel generators, would be in a position to pay royalty charges to gain access to the use of regulated water flows from irrigation reservoirs such as has already been proposed in Karnataka.  - xi - H. Proposed Mini-Hydro Demonstration Program 27. All the twelve schemes in Punjab State are earmarked for development by the PSEB using World Bank/IDA financing for the mini-hydro component of the ongoing Punjab Irrigation and Drainage Project. The schemes in the southern region are to be developed as part of the mini- hydro demonstration component of the proposed India Renewable Energy Development Project. Under the proposed project, the World Bank is to provide financing to the GOI to establish a funding facility for mini-hydro development. It is envisaged that SEBs as well as private sector companies would be eligible for loans from the facility to develop the irrigation based mini-hydro prospects. Subject to the detailed preparation and appraisal of the proposed project, it is expected that the World Bank would provide technical assistance to address the following requirements for effective implementation of the schemes: (a) strengthening the capacity of IREDA to administer the funding facility in a manner that would accelerate the development of economically and financially viable mini-hydro schemes based on design principles and approach presented in this report. If feasible, a separate revolving fund would also be established at IREDA for pre-investment work needed to sustain the pipeline of viable mini-hydro projects; (b) conducting in-service training programs under DNES/IREDA sponsorship to develop the capablfity of professional personnel (i.e., from SEBs, private sector, etc.) involved in planning and executing irrigation based mini-hydro schemes, especially the investigation, design, construction, operation, and maintenance of grid-tied schemes; (c) strengthening the capacity of DNES to promote and support a nationwide effort to inprove planning and policy formulation for mini-hydro development, and to accelerate the investigation and preparation of prefeasibility studies for prospective mini-hydro schemes associated with existing and planned irrigation dams and canal systems in all states. (d) strengthening the capacity of the SEBs to implement the mini-hydro programs, especially on technical matters such as identifying, investigating, and preparing preliminary designs for mini- hydro prospects, and on project management involving the application of "cost centers' and project matrix arrangements to implement the schemes (e.g., supervising procurement and construction work, etc.). 28. During the study, discussions were held with senior officials at the Central and State GOI levels and the SEBs to define a suitable framework to minimize implementation delays. The consensus reached was that the following arrangement may be needed to strengthen the capacity at the state level to accelerate irrigation based mini-hydro programs during the Eighth Plan. Further work is required to resolve the issues below, taking into account the particular organizational settings in each state, and more in-depth World Bank appraisal of the proposed project. 29. Inter-AVgen Cordination at State Government Level The key agencies for developing irrigation based mini-hydro schemes are the SEBs and the Irrigation Departments. Currently, coordination between the two agencies on matters concerning investigation, design, construction, and operation of schemes usually is ad-hoc. There is consensus on the need to formalize such coordination by establishing Mini-Hydro Coordination Committees in each state. It is envisaged that such Committees, working under the chairmanship of the Secretary, Department of Power and/or  -xli - Energy in the respective state governments, would meet at least once every six months to review progress, especially to resolve any issues and bottlenecks that may arise in the mini-hydro program, especially in arranging for all the necessary approvals of proposals that would be submitted by both public and pri ate sector organizations for the design and construction phases of each scheme. These arrangements need to be formalized before the implementation of the schemes gets underway for the proposed project. 30. Establishment of Mini-Hvd.ro Cells in SEBs. At present, there are no clear lines of accountability within the SEBs for the functions associated with mini-hydro development. Typically, the technical staff involved in the design, construction, and operation/maintenance phases of the mini-hydro are scattered in several departments within the SEBs. For the most part, persons designated as Project Managers for mini-hydro schemes have no direct administrative control over the staff involved in the design and implementation functions. In anticipation of an expanded mini- hydro program during the Eighth Plan, some steps have already been taken to improve coordination among the SEB technical staff; the approach has been to establish Mini-Hydro Cells or Divisions under the supervision of a Chief Engineer. For example, the PSEB already has established a Mini- Hydro Division under the supervision of the Chief Engineer (Mukerian Project); and the TNEB maintains a Mini-Hydro Cell under the supervision of the Chief Engineer (Civil Desigrns). On the other hand, the KPC has adopted the project matrix approach under which the Chief Engineer (Planning and Renewable Energy) takes charge of all aspects of the mini-hydro program, drawing as necessary on personnel from other departments. The roles and responsibilities of the Mini- Hydro Cells or Divisions need to be further elaborated, especially if the role of each SEB eventually becomes one of a State Nodal Agency to which the Committees could delegate some statutory tasks, such as securing formal clearances for the schemes from agencies responsible for regulatory matters concerming forestry and environmental protection, etc. 1. Conclusions 31. The study provides a systematic framework for designing economically viable mini- hydro schemes using the country's extensive infrastructure for surface irrigation. The mini-hydro component of the proposed India Renewable Energy Development Project is intended to translate the results of this study into a viable and cost-effective approach to develop the mini-hydro potential that is associated with the country's vast network of surface irrigation infrastructure, and to increase the contribution of such low cost and environmentally benign schemes to the overall strategy to reduce power supply deficits and improve service quality in outlying parts of the grid. The next steps are to proceed to prepare detailed designs, cost estimates, technical specifications for procurement purposes, and implementation plans for the mini-hydro schemes in each of the states covered by this study, and to systematically identify and develop similar schemes in the remaining states of the country.  I. INTRODUCIION A. Background 1.1 In India, there is the general perception that mini-hydro schemes are economically unattractive investments which must be assigned a lower priority relative to the large conventional hydropower systems. Over the past decade, the pace of India's large conventional hydropower program has slowed down because of: (i) the lack of financial resources in the states with the greatest hydropower potential; (ii) the recurring and drawn out disputes over water rights between states; and (iii) environmental and resettlement issues associated with large schemes; and (iv) the limited technical resources to proceed simultaneously with the preparation of several large schemes. Recognizing that the above impediments do not usually arise with mini-hydro schemes, the GOI is re-evaluating the scope for increasing the contribution of mini-hydro schemes to the power development goals of the Eighth Plan. 2/ 1.2 In a recently completed review of the country's non-conventional energy program, the Energy Sector Management Assistance Program (ESMAP) concluded that all the basic prerequisites for economically viable mini-hydropower generation exists at sites in India that are associated with irrigation water storage and distribution infrastructure (i.e., to harness the hydraulic energy created by the discharge of water from irrigation dams, and across diversion weirs, and canal drops). 3. 1.3 Since independence in 1947, the total area under irrigation in the country has increased from 19.5 million hectares to over 70 million hectares. In the mid 1980s, the Rural Electrification Corporation (REC) conducted a survey to obtain data and information on the potential for power generation on existing irrigation systems in the country. The information supplied by the State Electricity Boards (SEBs) indicated that about eight hundred sites associated with surface irrigation structures in eight states were among the most prospective sites for mini- hydropower development (Table 1.1). IRRIGATIN BASED MINI-MYDRO PROSPECTS IU SELECTE STATES muAtE NO. OF SITES ESTI1ATED CAPACITY IDENJIFI ED _ gS) _ Andhra Pradesh 283 112 Karnataka 197 159 Tamit Nadu 33 115 Naharastra 114 69 Uttar Pradesh 62 153 Punjab 44 79 Bihar 38 34 Uest Bersal 23 57 794 778 Source: REC, CEA, DNES. Table 1.1 2/ India's hydropower potential is equivalent to about 100,000 MW of which only 5000 MW is associated with mini-hydro sites. Only 16,000 MW have been developed; some 47,000 MW are under construction, and a further 23,000 MW are at various stages of planning. 3] In November, 1988, ESMAP issued a report: "India: Opportunities for Commercialization of Non-Conventional Energy Systems".  - 2 - 1.4 Despite the initial assessment by ESMAP, there still are doubts within the GOI about the economic viability of irrigation based mini-hydro schermes. These doubts persist because of recent experience with the construction of pilot irrigation based mini-hydro schemes in the countty. During the Seventh Plan, the SEBs in the south initiated construction work on sixteen schemes (Table 1.2); as of September, 1990, only six of those schemes had been commissioned. In cost effectiveness terms, the schemes developed in Kerala were the most competitive (Rs. 14,000- 19,000/kW); altogether, about Rs. 260 million was spent to develop three irrigation based mini- hydro schemes. In Andhra Pradesh, the pilot program concentrated on mini-hydro prospects on the Kakatiya D83 Branch Canal. Work was initiated on six canal drop schemes, three of which already have been commissioned; as indicated in the table below, the expenditure on the schemes have been in the range of Rs.19000 to 28,000 per kW installed. The least cost effective schemes were in Karnataka. About Rs. 317 million was invested to develop four schemes with a total capacity of about 11 MW; the expenditure on three of the four schemes exceeded Rs. 48,000/kW installed. ESTINATED COSTS OF PILOT SCUEJES IN SOUTHERE RGION STATESCJHEME CAPACITY INVESTMENT a/ (kW) (Rs. mit.) (Rs./Kw) ANDORA PRADESH Kakatly. BC ( 3*220 12.5 18939 Cluster I ( 3*220 13.1 19848 - 3*220 14.4 21818 Kaketlys BC ( 3*500 23.0 23000 Cluster 2 ( 3*500 24.6 24600 ( 3*500 24.1 24100 KARNATAKA Sirtwar 1*1000 49.6 49600 KatmaLa 1*400 34.0 85000 Ganekat 1*350 17.3 49429 MatILurpur 2*4500 216.6 24067 KERALA Peppara 1*3000 56.7 18900 Nadupetti 1'2000 33.2 16600 Chlmonf 1*2500 36.0 14400 TANIL NADU Lower Shavani(LBC) 4*2000 207.5 25938 Vasgaf 2*3000 140.1 23350 Pykara 1*2000 69.1 34550 e/ utI estimates in 1988 prices. Source: APSES, KSEB, PSES, THEB, KPC. Table 1.2  -3 - 1.5 The cost of developing irrigation based mini-hydro schemes in other regions of the country have also been high. For example, the Punjab State Electricity Board (PSEB) recently commissioned four schemes which are located on canal drops located at Nidampur, Rohti, Tuhi, and Daudar on the Sirhind Canal (Map - IBRD 22785). The average eqpenditure for the schemes, which have a combined capacity of about 4 MW, 4/ was about Rs. 30,300/kW installed. 1.6 The private sector has been invited to participate in developing irrigation based mini-hydro schemes; the performance so far also has been poor. In Karnataka, the State government initially offered leases to allow private companies to develop six prospective sites. Six private companies signed leases to develop one or more sites; only one was able to mobilize the resor.rces required to begin construction at the site. Eventually, the leases for the remaining sites lapsed. The Karnataka Power Company (KPC) took over responsibility for the development of two of those sites. Improving Cost-Effectiveness 1.7 Following the transfer of responsibility of mini-hydro schemes (up to 3 MW capacity) from the Department of Power (DOP) to the DNES, a multi-agency Sub-Committee on Mini- Hydropower was convened under the auspices of the DNES Working Group for the Eighth Plan to formulate a strategy to improve the cost-effectiveness of mini-hydro programs in general, and to review proposals for the Eight Five-Year Plan (1990-95). In parallel with the work of the Sub- Committee, the GOI through DNES requested ESMAP to assist further in critically evaluating proposals for new irrigation based mini-hydro schemes in several states, and if warranted by the fimdings, to address comprehensively the pre-investment requirements for a multi-scheme investment program for consideration by international and/or domestic financial institutions. 1.8 Following the request for ESMAP assistance, a preliminary but critical examination was made of available information and documentation on the existing and proposed schemes. As a result, ESMAP identified three main shortcomings in the approach to irrigation based mini- hydro development in the country. First, the initial batch of schemes were conceived, designed, and executed as scaled down versions of large conventional hydro installations. Consequently, there are numerous redundancies in the designs for key features such as the layout of civil works, the facilities incorporated into the powerhouse structures, the selection of turbine-generator equipment, and the specification of electrical switching and protection systems. Second, due to the use of relatively complex layouts for the schemes, the gestation time to construct and commission the schemes has been unacceptably high. For example, it has taken over four years to complete the majority of the pilot schemes in the southern region. As a result of the slow pace of implementing the construction work, there has been a significant escalation in capital costs and in interest payments during construction. E/ Third, the viability of tne pilot schemes were being undermined by the use of unnecessarily large numbers of technical staff to operate and maintain the mini-hydro schemes. The 4/ The schemes were developed as part of a pilot program that was funded exclusively by the State Government in Punjab. 5/ In Tamil Nadu, such delays resulted in marked increases in the costs of establishing all three pilot schemes. Over the five years that it took to develop the schemes: the costs of the Lower Bhavani scheme increased from Rs. 207 million to Rs. 241 million; the costs of the Vaigai scheme also increased from Rs. 140 million to Rs. 162 million; and that for the Pykara scheme, from Rs. 70 million to Rs. 82 million.  001 concurred with the preliminary findings of ESMAP; consequently ESMAP proceeded with the Pre-investment study. B. Objecilves 1.9 Te principal objective of this stud_y was to apply techno-economic criteria to improve the design and economic viability of irrigation based mini-hydro schemes, and to identity and prepare a medium term investment program to develop a series of irrigation based mini- hydro schemes in the southern region of India. Accordingly, the study covered previously identified 2nd investigated sites in the States of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu which have similar topography and irrigation regimes. At the request of the DNES, the scope of the study was expanded to include twelve prospective sites in the State of Punjab, ali of which are earmarked for development under the mini-hydro component of the ongoing World Bank/IDA financed Punjab Irrigation and Drainage Project. 1.10 The pre-investment study was structured to: (a) assess the technical and economic feasibility of developing between 10 to 20 prospects in each state, especially those that had already been investigated to at least the feasibility stage by the respective SEBs; (b) critically evaluate the cost-effectiveness of engineering designs and specifications that had been proposed by the SEBs, and to redesign each scheme to maximize the number of kilowatt hours produced annually per unit of investment. Also the aim was to determine the minimum infrastructure and equipment required to establish each scheme; (e) update and revise the estimates of the capital costs of developing the schemes, to evaluate the economic and financial viability of establishing the schemes to provide energy and voltage support to the power grid in the respective states; (d) explore the scope for achieving full cost recovery on all phases of mini-hydro development; and (e) evaluate the financial returns that private companies and investors would realize by developing the schemes as alternative sources of captive generation; (f) prepare a comprehensive report which would define technical concepts and design methodology used for the study, the relative benefits and costs of the proposed program, investment requirements at the state level, and the financial impact of the proposed program on the states. 1.11 Despite the focus on the southern region, the design methodology was also meant to be applicable to the preparation of similar investment programs in the other regions of the country.  C. Cokiduct of Pre-Investment Study 1.12 The fieldwork was conducted in three phases in collaboration with counterparts from the DNES, the SEBs, and KPC. The preliminary evaluation of SEB proposals was done from September to December, 1989.